Former RBS chief Stephen Hester joins RSA as CEO

Stephen Hester has been appointed chief executive of insurance giant RSA

Scandal-hit insurer RSA Insurance has hired the former chief executive of Royal Bank of Scotland, Stephen Hester, to run it in the wake of the discovery of a £200m black hole in its Irish business.

Mr Hester has joined RSA with immediate effect, taking over from Martin Scicluna, the insurer’s chairman, who stepped into the chief executive role in December after the resignation of then boss, Simon Lee.

Mr Lee’s departure followed the shock announcement in November of a capital shortfall in the company’s Irish business that was initially put at £70m, but has ended up at about £200m.

Commenting on his appointment, Mr Hester said he would be working on a review of the business to help the company “re-emerge as an attractive solidly performing group”.

He said: “The challenges of recent months have demonstrated that we have not lived up to our stakeholders’ expectations and performed to our true potential. We have an obligation to deliver shareholder value and excellent products and services that provide everyday protection for our customers.”

His appointment comes four months after he left RBS amid a dispute with the government over the future direction of the taxpayer-backed lender.

In his new job, Mr Hester will be paid an annual salary of £950,000, less than the £1.2m a year he earned at RBS. However, on top of his salary he will be granted an initial award under RSA’s long-term incentive plan of £2.85m, or 300pc of salary, and will be eligible for an annual bonus of 160pc of his salary, or £1.52m.

Shares in RSA jumped 2.86 on the news of Mr Hester’s appointment to 99p, as investors welcomed the end to the uncertainty over the leadership of the insurer.

Chris White, head of UK equities at Premier Asset Management, said the hire was “a bit of a coup” for RSA.

“After a string of profit warnings, investors will take some reassurance from the company’s ability to attract such a big name to the post,” said Mr White.

Mr Hester had led RBS for five years following its £45.5bn taxpayer-funded bailout in late 2008.

Before joining RBS he had led London-listed property developer British Land. However, most of his career has been spent as an investment banker working for Credit Suisse where he held a variety of senior jobs, including chief financial officer, global head of fixed income, and co-head of European investment banking.

Mr Scicluna said he was “extremely pleased” at hiring Mr Hester.

“His appointment follows a comprehensive global search process which produced a shortlist of excellent candidates. He has the unanimous support of all the directors and we are confident that, with the support of the board and the executive team, he will work quickly to take the group forward,” said Mr Scicluna.

RSA is due to report its full-year financial results later this month.